A core component of comprehensive financial planning is the management of financial risk. Financial risk varies from trivial (lose wallet, parking ticket, etc.), to moderate (temporary unemployment, minor car accident, etc.), to notable (liability, personal injury, etc.) to catastrophic (death, permanent disability, etc.).
Insurance is generally not available for trivial financial risk. Individuals must therefore absorb the potential losses involved with small financial risks.
Insurance is available for most kinds of moderate and notable financial risk. This usually comes in the form of unemployment insurance, workers compensation, and property/casualty/liability insurance (all of which are available through general insurance agencies).
At Howe & Gramlich we help our clients manage the following types of catastrophic financial risk: premature death, long-term disability, critical illness and the cost of long-term home or institutional health care.
The largest financial risk most people face is premature death. We help our clients manage this risk by analyzing needs and providing sensible solutions. Acting as insurance brokers we survey the market of life insurance providers to find the lowest cost policy available. The products we use will generally fall into these categories:
- 5, 10, and 20 year term life insurance
- Fixed-term life insurance to age 65, 75, etc.
- Mortgage life insurance
- Universal life insurance
- Whole life insurance
Long Term Care
Many of our clients are seniors, and many seniors will require in-home or institutional health care during their lives. Public support is available for home care, but financially limited. Publicly funded institutional care is also limited, and the demographics facing our society point to a worsening situation. Private in-home health care is available, but can be quite costly. Private long-term facility care is also available (the industry is growing rapidly) but can be very costly, running into the thousands every month.
At Howe & Gramlich we help our clients understand the financial risks associated with long-term health care, both at-home and institutional. Where the risk is great (and the financial resources are limited) we provide solutions using Long-Term Care (LTC) insurance.
LTC insurance can create peace of mind for retirement planning, and ensure that a lifetime of accumulations is retained for the benefit of future generations.
A disability is a physical or mental impairment caused by an accident or illness. A disability may partially or totally limit one’s ability to perform an occupation and therefore earn income. A permanent disability could result in the loss of earned income for an entire lifetime.
Prior to retirement most families live on one or two earned incomes. In the case of two income families, if one of the income earners suffered a disability the loss of income could be substantial. In the case of individuals or single income families, the loss of income could be catastrophic.
A disability could also have dire financial consequences to a small business owner or fee-for-service professional. The loss of a principal due to a disability can often lead to the collapse of a small business or the dissolution of a professional partnership.
Not only does a disability decrease or eliminate income, it may also cause an increase in expenses.
While many people have disability coverage in the form of workers compensation, unemployment insurance and/or group disability insurance, the benefits provided by these plans are 1) largely short term, 2) financially limited, and 3) often difficult to qualify for.
At Howe & Gramlich we help our clients manage the risk of long-term disability through analysis, solutions and the use of the following products/services:
- Personally owned disability insurance
- Accident-only disability insurance
- Disability buyout insurance
- Salary Continuation Plans
- Health and Welfare Trust
Although we’re living longer due to better health care and advances in medical science, we aren’t doing so in better health. 50 years ago many critical illnesses such as stroke, heart attack or cancer would have caused death, but here in the 21st century most people survive these illnesses (or live much longer after onset).
If an individual survives a critical illness and can return to work immediately, he or she may have to return to work immediately, even if the illness was attributable to their occupation. Unless the condition creates a clear-cut disability, the ability to return to work will often rule out a disability claim (from any and all sources). This will force the individual back to work soon after the critical illness, perhaps to the detriment of their long-term well-being.
In addition, the rising incidence of critical illness has placed stress on our health care system, resulting in wait lists for many potentially life-saving procedures. Health care for a critical illness is available outside the “normal” health care system (generally in another country) but at a significant cost to the individual.
Critical illness (CI) insurance pays a lump-sum benefit to the insured upon the diagnosis and subsequent survival of a critical illness (what exactly defines a “critical illness” differs by the insurer and policy chosen – most policies cover 10-20 such conditions).
CI insurance is therefore designed to fulfill one (or both) of these two purposes:
- To allow the insured to take time off work to improve their health and/or lifestyle (perhaps to avoid another critical illness). A year off following a critical illness may be recommended – CI insurance can make it possible. Early retirement following a critical illness may be advisable – CI insurance can make it possible.
- To provide the necessary funds for a medical procedure outside the “normal” health care system (following the onset of a critical illness). It could truly make the difference between life and death.
At Howe & Gramlich we listen to our clients. If our clients are concerned with the financial risk associated with a critical illness, we provide analysis, recommendations and solutions using CI insurance.